Is liquor the next luxury?
Consumer Staples
David Scott argues that luxury liquor companies are facing the same structural challenges confronting luxury apparel. While pandemic-era demand and post-Covid inflation masked underlying weaknesses, those issues are re-emerging. Key headwinds include shifting demographics and declining alcohol consumption among younger generations, as well as industry overpopulation and fragmentation. Liquor companies are experiencing falling asset turns but margins have not risen to compensate and the operating leverage effects will be "very vicious" as a result. David also sees the rising use of weight-loss drugs like Ozempic as a further negative catalyst. Companies discussed include Diageo, Pernod Ricard, Brown-Forman, Kweichow Moutai and Wuliangye Yibin.
Edition: 213
- 13 June, 2025
Pernod Ricard (RI FP) France
Consumer Discretionary
Woozle’s Q1 channel checks reveal a sharper-than-expected revenue and volume decline with clear underperformance vs. Bloomberg estimates and accelerating market share losses. Despite some stabilisation from pricing actions and marketing efforts, underlying consumer demand remains weak, product innovation execution is poor and competitive pressures are intensifying. In North America, organic revenue fell -3.6% Y/Y, with 83% of respondents reporting declining volumes and 50% missing internal targets. In Europe, organic revenue dropped -1.3% Y/Y, with 60% of buyers citing flat or negative growth. Aperitifs and RTDs performed best across North America, while no clear standout category emerged in Europe. Key sub-brands like Suze and Pastis 51 showed strength, whereas Chivas, Olmeca and L’Orbe underperformed.
Edition: 209
- 18 April, 2025
Pernod Ricard (RI FP) France
Consumer Staples
A cash mirage - a closer look at the balance sheet shows a huge increase in the use of factoring in H1, benefitting cash flow by nearly €500m. Stripping out the sold receivables, “Trade receivables before factoring/securitisation” has moved up in the past 6 months from €2.6bn to €3.8bn. It is also higher than the same point in Jun 23 despite falling sales. This is concerning as it raises questions about collectability, particularly when one considers an existing red flag dating from the FY24 financial statements on ageing of receivables, which showed a sharp increase in receivables past due more than 30 days from 5% to 14%.
Edition: 205
- 21 February, 2025
Pernod Ricard (RI FP) France
Consumer Staples
Woozle downgrades the stock to Sell following their latest channel checks. Volumes declined by 0.5% on average in 4Q24 with prices up 2% Y/Y. Within RI's portfolio its Rum category performed the best. This segment’s success was attributed to consumer interest in premium products and the solid growth of Havana Rum. Conversely, there was an overall decline in spirit consumption, with Vodka, Gin and Whisky suffering the most. RI’s Whisky and Vodka categories were notably impacted, especially flavoured Vodka, which saw strong declines in the UK while Absolut underperformed.
Edition: 187
- 31 May, 2024